Afternoon, WSO. I'm underwriting a large mixed-use deal in which my company would be the master developer. We'd develop some of the buildings ourselves while bringing on partners to do the multifamily and stand alone retail. Ideally, we'd like our partners to help contribute on the overall site infrastructure, but I'm struggling to think of the best financial structure for them to get paid with - essentially, how to answer "we're interested in helping, but how do we get paid on the horizontal work?"
The site is a 99-year ground lease, so there would be monthly payments to the lessor. Would we charge a fee based on the cost of the sitework, charge a fee based on the value of the ground lease, charge fees based on both, or some other method? Additionally, is there any way for them to get an actual return on their investment beyond fees?
My firm looked at doing this somewhat recently for a non real estate focused entertainment group looking at selling about 300 acres of covered land.
We basically looked at charging a flat master developer fee, basically what we thought our time was worth, in addition to a 3-4% CM fee on all horizontal infrastructure costs (excluding demo on existing improvements) and then a 5% incentive fee on the Net Sale Proceeds on the land (Sale Proceeds less zoning/entitlement/permitting costs, commissions, legal, infrastructure, carry etc.).
What city is this project in?
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